Although all crypto exchanges promise top-notch security, please don’t believe them. Continue reading to learn about more security steps to be aware of.
It’s critical to buy cryptocurrencies securely. This is because this is a relatively new and unregulated industry. While almost all bank and brokerage accounts have insurance and other safeguards to keep your money safe, digital currency exchanges do not.
Several high-profile exchange hacks have demonstrated how simple it is to lose money. Mt. Gox is one such case. Around 850,000 Bitcoins, valued at around $450 million, were stolen in 2014. Only about a third of them have been found since then.
One of the main reasons security is typically a significant concern when purchasing digital currencies is because. If you’re thinking about investing in cryptocurrencies, make sure you use an exchange that goes out of its way to protect your funds.
TABLE OF CONTENTS
What Makes an Exchange Extra Secure?
The majority of the major bitcoin exchanges have strong security measures. Two-factor authentication (2FA) is a typical example of user-level security. When you enable 2FA, you’ll be required to submit additional information every time you log in, such as an SMS code.
Users should seek an exchange that will go above and beyond to protect their Bitcoin and other money. Here are three more security features to keep an eye out for:
- Insurance: When you deposit money in a bank account, it is usually FDIC insured, protecting it from theft and bank failure. The Federal Deposit Insurance Corporation (FDIC) does not ensure cryptocurrency exchanges. However, exchanges that prioritize security provide additional protection for your cryptocurrency. You may be paid if it is taken from the exchange.
- Cold Storage: Exchanges are required to retain some cash in “hot storage,” which is available online. You’ll want an exchange that allows you to store most of your assets in cold storage in terms of security. That it’s offline, often air-gapped, and difficult to access physically.
- Bug bounty programs: A bug bounty program aims to incentivize independent security specialists, sometimes known as ethical hackers, to find system flaws. Exchanges provide incentives for people to report security flaws rather than exploit them to steal your cryptocurrency.
Cryptocurrency Platforms that go the Extra Mile
Gemini claims to have $200 million in cryptocurrency insurance. It also ensures the coins are in cold storage and allows customers to buy additional crypto insurance.
Most coins are held in cold storage, and it also has a bug bounty.
Coinbase says it ensures all the currency is held in hot storage. Also, 98% of currency is held in cold storage. Coinbase also has a bug bounty.
According to the company, Lloyd’s insurance covers Robinhood’s assets against damages, including theft. Most of its coins are held in cold storage, and it supports a bug bounty.
Crypto.com says it has secured $360 million in cold storage insurance against physical damage or destruction and third-party theft. 100% of user cryptocurrencies are held offline in cold storage. Finally, as all other platforms mentioned, it supports bug bounty.
CEX.IO is the safest crypto platform that boasts a high-security level, so when you buy your crypto there, you can feel relaxed, knowing it is perfectly safe.
Use a Wallet for Extra Security
Bear in mind that even if you use a super-secure exchange, you should look into crypto wallets for additional protection.
Recovering your funds will be nearly complicated if your cryptocurrency’s private keys are stolen. Using a cold wallet is the most secure approach to protect your digital currency. You buy and maintain a piece of hardware off the grid, making it nearly impossible to hack.
Because cold wallets aren’t connected to the internet, you won’t be able to access your cryptocurrency easily. On the other hand, a hot wallet is a wallet that is accessible via the web, mobile, or desktop. It’s a good alternative if you need to obtain a currency rapidly. Because it isn’t as secure as a cold wallet, you should only keep a limited amount that you plan to spend frequently.
Purchasing Bitcoin or any other digital currency has several dangers. That’s why it’s a good idea to safeguard yourself by using insurance, cold storage, and bug bounty programs. You may rest assured that you’re doing everything possible to protect your investments if you do.
Crypto exchanges have evolved a lot since they started, and every day they are getting safer and safer for you to store your crypto on. However, it would be best if you always were cautious when it comes to the safety of your assets. As we mentioned, wallets should always be your number one investment when it comes to your assets, especially if you have a large amount of money invested in different cryptocurrencies.
Finally, before we close this article, the golden rule of cryptocurrency investing is that you should only invest money you are not afraid to lose.
Aayush Kumar Gupta is the founder and creator of ExploringBits, a website dedicated to providing useful content for people passionate about Engineering and Technology. Aayush has completed his Bachelor of Technology (Computer Science & Engineering) from 2018-2022. From July 2022, Aayush has been working as a full-time Devops Engineer.